A year of living dangerously

In the year when City lawyers literally came under attack from anarchist groups and metaphorically from the media, The Lawyer examines the good, the bad and the ugly incidents that shaped the legal year.

The good

Cozen & O'Connor was the first US firm of the year to set up in London when it moved in with Radcliffs in February. Altheimer & Gray followed in April.

In October, New York firm Cahill Gordon & Reindel announced its own plans. The year also saw one UK firm trying to find a solution to the threat posed by the US invaders when Beachcroft Wansbroughs agreed to share seven project partners with Buchanan Ingersoll, which had tempted them over.

The Law Society saw some radical changes when more than 70 per cent of members voted to scrap the Solicitors Indemnity Fund (SIF) in April, while in October it voted to accept lawyers from multidisciplinary practices into its ranks.

In-house lawyers took the higher moral ground when in March British Aerospace demanded that its external legal advisers show a commitment to pro bono work or face being chopped.

It also saw David triumph over Goliath in the legal panels when Bupa branded City charge-out rates “ridiculous”, vowing to go to regional firms for legal advice instead.

In April, The Post Office reviewed its City panel,while firms lined up to gain from an influx of mortgage work at Standard Life when it unveiled plans to double its panel.

In May, Linklaters & Alliance picked up work from Sainsbury's when the supermarket chain ended its exclusive legal outsourcing agreement with Denton Hall.

The following month, another UK retailer, Somerfield, set up its first panel of external legal advisers following its recent merger with Kwik Save.

In August, Wragge & Co won property work from McDonald's and in November was signed up by British Airways, leaving three magic circle firms disappointed.

And Bradford & Bingley announced its first panel of 13 law firms to take on bulk conveyancing work.

The last 12 months turned out to be a bonus year for City lawyers when in January a mystery US firm offered the first £1m wage to tempt partners from UK practices.

Salaries rose an average of four times the rate of inflation over the past year, said a survey released in February.

In August another survey showed in-house lawyers paying more than ever in legal fees, with 24 per cent spending more than £1m annually. In the same month, The Lawyer 100 survey showed that total fee income from the top 100 law firms had crossed the £5bn barrier for the first time, with gross fees rising by 16 per cent.

In September, both Rowe & Maw and Wragge & Co offered clients alternative methods of paying legal fees. Rowe & Maw can now take a share in a company in part-payment of fees while Wragges offers clients an all-in-one set fee package to cover annual expenses.

In May, Ashurst Morris Crisp engaged the services of management consultancy Hildebrant International to search for a US merger partner.

But arguably the biggest story of the year came with the merger of Clifford Chance with German firm Punder Volhard Weber & Axster and US firm Rogers & Wells to create the world's largest law firm.

Clifford Chance voted to go ahead with the plan in July and the same month announced that it would become a New York-based LLP, pre-empting the introduction of the LLP bill in the Queen's Speech.

Denton Hall and Wilde Sapte announced their intention to become Denton Wilde Sapte in October, while a month later merger talks between Newcastle firms Watson Burton and Ward Hadaway were revealed.

The bad

While mergers made the biggest headlines this year, some firms tried but failed to marry.

In January, Richards Butler and Theodore Goddard finally decided to call off their proposed merger due to objections by the latter firm's partners. It had intended to be a tripartite merger, but third member Denton Hall withdrew in October last year.

Dibb Lupton Alsop had a shaky start to the year, losing a huge chunk of its professional indemnity teams in Manchester and Leeds to rival firm Hammond Suddards. A month later the Manchester head of insolvency left.

The year also saw several large corporates make swinging cuts in their legal panels and in-house legal departments.

In January, energy giant BP announced plans to chop up to 20 per cent of its in-house lawyers following its £67.5bn merger with Amoco.

In February, Eagle Star closed its four-strong in-house legal department as a result of its merger with Zurich Insurance.

Also that month, lawyers faced the prospect of disclosing their earnings and providing personal financial guarantees to creditors under proposals included in the trade and industry committee's report on the Limited Liability Partnership Bill.

And Davies Arnold Cooper (DAC) slashed 90 staff in its Manchester and London offices.

In March, US firm Cadwalader Wickersham & Taft nearly started turf warfare between transatlantic and UK firms by implementing huge pay increases for its lawyers.

Also that month, Halifax Building Society reorganised its panel and dropped Dibb Lupton Alsop in place of Shoosmith & Harrison for its repossession work.

Panel cullings continued unabated in April. Law firms were hit badly when three major companies, Marks & Spencer, Barclays and Prudential, announced reviews of their chosen legal advisers.

In April, DAC closed its Manchester construction department.

The insurance sector's major cut on outsourced legal work began in earnest in May when Eagle Star started to reduce its legal panel.

The exodus from Garretts began in May with the loss of three partners to Addleshaw Booth & Co.

In June, Ashurst Morris Crisp's banking department was hit again when it lost its fifth banking partner to Shearman & Sterling in the form of highly ranked lawyer Adrian Knight.

That month, Zurich Commercial slashed its panel from 100 to 16 firms. Barclays unveiled its new streamlined panel with a cut from 13 to five.

June saw DAC's IP team move to Henry Hepworth, while the legal profession saw the results of strategies similar to Cadwalader's when a survey of legal salaries revealed that US firms in London pay almost double what their UK counterparts offer.

US firm Morgan Lewis & Bockius was among those promising to pay its UK partners and associates at transatlantic rates.

In June, lawyers faced a hike in their SIF contributions in the year leading up to the insurance scheme's demise due to an expected surge in claims.

In July, Addleshaw Booth & Co shut down its debt recovery department.

In September US firm Sonnenschein Nath & Rosenthal closed its London office after high profile poaches from magic circle firms.

In August, CGU cut its property management panel from 10 to three, while Berrymans Lace Mawer called off two potential matches with Davis Arnold Cooper.

September saw Berrymans ending talks with with Linsley & Mortimer and US firm Sonnenschein Nath & Rosenthal closed its London office after making high profile poachings from magic circle firms.

In September, a survey by The Lawyer and PricewaterhouseCoopers showed that although total fee income over the past year had gone up, the rate of increase had slowed.

Insurance lawyers continued to suffer in October, when Royal & SunAlliance announced plans to limit commercial litigation work from six firms to two.

By December, Garretts had lost 10 partners, while Mills & Reeve and Martineau Johnson ended two months of merger talks.

Next year's rationalisation will include credit card giant Bank One International and Hendersons Investors, while Sema is selecting its favourite one or two firms at the moment.

The ugly

In January, Manchester-based BCR Associates claimed it had secured a large number of claims from firms which believed they had been overcharged by legal postal service Hays DX.

In the same month, the Regis inquiry into funding for the implementation of an IT system, described as the “biggest scandal to hit the law profession”, ended with a finding of no impropriety by the British Legal Association.

A wrangle between Eversheds and former head of tax Reg Nock began in March when he left the firm after just eight months. In May he threatened legal action over unpaid fees.

Insurance giant CGU was exposed in April as forcing a number of its panel to accept fees at least £30 an hour below the market rate.

In June, Robert Sayer, Law Society presidential candidate, launched an astonishing attack on his last-minute opponent David Keating, calling him a “pillock” and his backer Martin Mears “a piece of dog turd”. The Law Society's problems continued until the end of the year when vice-president Kamlesh Bahl was asked to stand down for a month while accusations of bullying were investigated.

Cameron McKenna was taken to an industrial tribunal after Russian lawyers based in London made claims of sexual discrimination against the firm. In September, the former head of the Serious Fraud Office George Staples was called in by the firm to investigate allegations contained in two claims.

City law firms came under siege in June from anarchist activists protesting against global capitalism (see picture).

Eversheds was investigated and fined by Opra in August for failing to pay into its employment services company staff pension scheme.

A row broke out at Cameron McKenna after it abolished the distinction between junior and senior equity partners in September.

Sex discrimination claims against Edward Lewis' chairman Tony Collins led to the decision to dissolve the 29-partner firm in October.

A row broke out after a survey, released by Wheeler Associates in November, revealed that most in-house lawyers did not regard legal directories as important in selecting law firms.

Hammond Suddards was raided by drugs police in November in the same week as the firm announced record half-year profits. The two incidents are not related.

Also in November, Peter Carter-Ruck threatened legal action against his own firm in a row about future expansion plans.

Rakisons was left smarting after intended merger partner Stephens Innocent announced it was to become Finers Stephens Innocent, after deciding to run off with the firm advising it on the Rakisons merger.

Allen & Overy's senior partner Bill Tudor John unexpectedly lost an attempt to be re-elected as head of corporate law. Guy Beringer was voted into the position.

In November, Ashurst Morris Crisp's property department was struggling to overcome a deficit in its budget as an exodus of assistants continued according to an internal memo leaked to The Lawyer.

Freshfields was blackballed by Citibank after acting for the Brunei government in suing the US bank. And Simmons & Simmons changed its partnership deeds at the end of the year to include gardening leave for the first time after losing nine partners during the year.

Managing partners on the move

January: Simmons & Simmons elected David Dickinson as its new managing partner to succeed Alan Morris.

March: Denton Hall elected new managing partner Virginia Glastonbury in place of Johnathan Tatten.

May: Theodore Goddard's managing partner Peter Kavanagh left his position as managing partner halfway through his term to be replaced by Peter Cooker, head of employment at the firm. Hill Taylor Dickinson's chairman John Pople gave up the post of chairman for elected replacement Robert Wallis while Rhys Clift became managing partner. Paisner & Co appointed Stephen Rosefield as its first managing partner. Charles Russell appointed Grant Howell as managing partner to take over from Patrick Russell. Dibb Lupton Alsop appointed Neil McLean as managing partner of its Leeds office to replace John Winkworth-Smith, who retired after 37 years at the firm.

June: Eversheds appoints its first female managing partner, Meg Heppel at its Birmingham office taking over from Ian Jollie.

July: Tony Williams stepped down as Clifford Chance's managing partner only two years into a five-year term.